Breaking my rule if Oil drops to $15p/b

[counter_violent]

Well that hotshot pro trader says June Contracts almost certainly won't go negative.

The evidence says otherwise. As early as yesterday prices continued to plummet across all instruments as those wishing to exit at any cost did so without waiting to see if the future time element would afford them a better price to exit.

Storage is still full and consumption demand is a long way off.
Cost of temporary shipping storage and capacity has to be weighed also.


Hate to say it but Nowler's trade is a Howler!

 

[new_trader]

http://www.cmegroup.com/education/courses/introduction-to-futures.html

 

[postman]

Crude $11.40 stonks to the moon.

 

[Nowler]

Hate to say it but Nowler's trade is a Howler!

We live and learn I guess...

I've just seen a great offer for magic beans!
2 for the price of 3!

Bargain

 

[counter_violent]

We live and learn I guess...

I've just seen a great offer for magic beans!
2 for the price of 3!

Bargain

Yeah but it's not too late to be proactive and do something about it.

 

[Nowler]

Yeah but it's not too late to be proactive and do something about it.

That's true
I'll have a think about it.

I've cancelled my remaining entry order anyway.
Will decide what to do with the rest of the position once I've had my coffee

 

[postman]

That's true
I'll have a think about it.

I've cancelled my remaining entry order anyway.
Will decide what to do with the rest of the position once I've had my coffee

Don't you drink Texas tea?

 

[new_trader]

That's true
I'll have a think about it.

I've cancelled my remaining entry order anyway.
Will decide what to do with the rest of the position once I've had my coffee

What will you think about? Whether the reasons to be buying oil have changed or whether an anonymous poster in a forum might be right?

 

[Nowler]

What will you think about? Whether the reasons to be buying oil have changed or whether an anonymous poster in a forum might be right?

Whether the reasons have changed enough to cut the position completely.

Trading at negative was an eye opener but I've decided to cancel my final entry order and reduce my position by a fifth.

As it stands, I am holding what I have.

 

[Dowser]

Stick to your plan Nowler, you'll regret it big time if you follow advice from anonymous people on a forum only to lose money. Nobody can judge your trade until you've closed out. Chin up, chest out...

 

[new_trader]

Stick to your plan Nowler, you'll regret it big time if you follow advice from anonymous people on a forum only to lose money. Nobody can judge your trade until you've closed out. Chin up, chest out...

I agree 100%. Use guaranteed stops if available, if not, use stops and prepare for the worst. I would be stacking oil below $15 and especially below $10 but I am reserving my margin for another trade that I currently have open. Think of the worst case and multiply that by two, if you can afford it, do it. Only if your reasons to trade haven't changed.

 

[Nowler]

Stick to your plan Nowler, you'll regret it big time if you follow advice from anonymous people on a forum only to lose money. Nobody can judge your trade until you've closed out. Chin up, chest out...

I agree 100%. Use guaranteed stops if available, if not, use stops and prepare for the worst. I would be stacking oil below $15 and especially below $10 but I am reserving my margin for another trade that I currently have open. Think of the worst case and multiply that by two, if you can afford it, do it. Only if your reasons to trade haven't changed.

I am trying to push those thoughts out of my head and stick to what I feel is the reality of the situation. I was prepared for price to go close to zero, not minus 30. That changed the game significantly.

As a result, I reduced my risk by cancelling the remaining entry order and closing out 1 fifth of the position.

I dont think price will go to minus 35 again... fear is more dramatic than greed, and the fear that those May Futures holders had was a curve ball that they did not foresee.

Now we have seen what can happen, thus, people wont be caught out like that again... I believe. I've reduced my risk to account for the new information that I have (it can totally trade negative), and also because i know there are other scenarios that i am likely not seeing.

On the other hand, the main reasons for being in the trade remain. So as it stands, I will not be cutting my position further. But will be considering buying more if prices go anywhere near that 0-5 level.

 

[Dowser]

I am trying to push those thoughts out of my head and stick to what I feel is the reality of the situation. I was prepared for price to go close to zero, not minus 30. That changed the game significantly.

As a result, I reduced my risk by cancelling the remaining entry order and closing out 1 fifth of the position.

I dont think price will go to minus 35 again... fear is more dramatic than greed, and the fear that those May Futures holders had was a curve ball that they did not foresee.

Now we have seen what can happen, thus, people wont be caught out like that again... I believe. I've reduced my risk to account for the new information that I have (it can totally trade negative), and also because i know there are other scenarios that i am likely not seeing.

On the other hand, the main reasons for being in the trade remain. So as it stands, I will not be cutting my position further. But will be considering buying more if prices go anywhere near that 0-5 level.

Just as long as it's your own plan and nobody else's - it's all good

 

[new_trader]

I dont think price will go to minus 35 again... fear is more dramatic than greed, and the fear that those May Futures holders had was a curve ball that they did not foresee.

Now we have seen what can happen, thus, people wont be caught out like that again... I believe. I've reduced my risk to account for the new information that I have (it can totally trade negative), and also because i know there are other scenarios that i am likely not seeing.

On the other hand, the main reasons for being in the trade remain. So as it stands, I will not be cutting my position further. But will be considering buying more if prices go anywhere near that 0-5 level.

Did you see spot prices go negative on your platform? I didn't. I only saw the expiring Futures contract go negative on the day it was expiring. I think your analysis is correct. Anyone with a current open position that doesn't want delivery will either close out positions or roll over to a later month so I suspect those fears are already built into the price, with the help of the MSM of course!

Bloomberg - Are you a robot?

www.bloomberg.com

 

[Nowler]

Did you see spot prices go negative on your platform? I didn't. I only saw the expiring Futures contract go negative on the day it was expiring. I think your analysis is correct. Anyone with a current open position that doesn't want delivery will either close out positions or roll over to a later month so I suspect those fears are already built into the price, with the help of the MSM of course!

Bloomberg - Are you a robot?

www.bloomberg.com

My platform is very basic.
It says nothing beyond it being a CFD.

In regards to the fundamentals of the trade. It will be interesting to see what Trump has planned off the back of the tweet I posted here.

I'll be watching how the factors of storage and economy start up play out very closely

 

[new_trader]

My platform is very basic.
It says nothing beyond it being a CFD.

In regards to the fundamentals of the trade. It will be interesting to see what Trump has planned off the back of the tweet I posted here.

I'll be watching how the factors of storage and economy start up play out very closely

Most likely it's the spot price which would be the most actively traded contract month, usually the one nearest expiry. Your quotes should be close to the the contract with the highest volume (NB: CME Prices are delayed by ~10min)

NYMEX WTI Crude Oil Futures & Options

Trade the most liquid crude oil markets in multiple contracts sizes and access global crude oil pricing and trading opportunities at CME Group.

www.cmegroup.com

 

[Big_P]

I'm struggling to get my head around this a bit ... someone might be able to help me.

So WTI right now :

Spot price - $14.93

May contract - now expired but went negative
Jun contract - $14.37
July contract - $20.92

These are prices quoted by IG Index as I type.

The May contract that went negative was what everyone was getting excited about in the news on Monday. But that expired soon after.

I understand the principle that oil companies can't stop production because it would be too expensive.
They are also running out of space to store. So they've got a problem.
The futures contract indicated that they were willing to make an agreement with a counterparty to effectively pay them take the oil off their hands. (in a month's time)

I am with Nowler's school of thought though. At some point in the future, once Coronavirus has blown over and countries like China start consuming again, then the oil prices should in theory rebound. Also there is talk of the Saudis making further cuts. Which may (or may not) have an effect.

So if I wanted to make a long term investment in oil - now - wouldn't I be better off buying an ETF for the WTI spot price?

I suppose my question is - could the spot price in theory trade below zero too?

If the answer to this is no , then ...

Let's say WTI spot price goes $5.

I pile in my life's savings.

The price only has to go to $10 and I've doubled my money.

Is this flawed thinking?


Big_P

 

[new_trader]

Very Quick Answer: My advice would be stay away from the crude oil ETF because it suffers a rollover premium.

http://ftalphaville.ft.com/2010/11/19/410806/commodity-etfs-even-worse-than-you-thought/

I experienced this with a NatGas ETF a few years ago and gave up on it in the end.

 

[Big_P]

Very Quick Answer: My advice would be stay away from the crude oil ETF because it suffers a rollover premium.

http://ftalphaville.ft.com/2010/11/19/410806/commodity-etfs-even-worse-than-you-thought/

I experienced this with a NatGas ETF a few years ago and gave up on it in the end.

Thanks for the answer New Trader, but I'm not sure I completely follow.

If I bought an ETF based on either WTI or Brent spot , then I would still incur a rollover cost ?

I would understand there being an admin fee of some description, but given there is no expiry to a spot price, where does the rollover occur?

 

[darktone]

Youve got an opportunity to learn something here Nowler.
Work out your trade size vs acc balance, how leveraged are you?
If youre not too hot (2x max id prefer 1x) you can trade around the position to improve your average. If youre hot get smaller and treat this as max position size and stick to it.

First accept your risk, where are you at wti at 0? Accept that!
Decide on a max/min position size and stick to it, you can trade say 30-50% of it. ie if the market takes off in your favour your worst case is being half size.
Aim ascending orders at value, ie youre long 100 units. You decided to trade 50 max. Aim to trade the volatility favourably, orders could be.

Keep a note of pnl as you execute. Youll have your ave position and BE point, your aim in this scenario is to improve youre BE point and be full size for the move.